Analysts see problem continuing as over 60% of revenue comes from North America
The sluggish demand from the US market will continue to hurt the business prospects of Indian IT outsourcing services providers even as the industry expects to see stability in the overall business environment in the second quarter of financial year 2010.
The delay in recovery of US economy, according to analysts and companies, will eat into the top- and bottom-lines of most Indian IT firms, even as they see a surge in demand from some European countries, including the UK and France, along with emerging geographies like Australia and West Asia. The reason is simple — most of the Indian IT services firms derive over 60 per cent of their revenues from the North Americas, including the US.
“There is no doubt that there is some comfort building in the environment. We are seeing some demand from emerging markets and Europe, but it is small in terms of overall exposure. The US has to recover for the world to stabilise, and growth in the US will happen only when consumers start spending there,” explains V Balakrishnan, CFO of India’s second-largest IT firm Infosys Technologies.
Amid the global financial uncertainties in the first quarter of the financial year 2009-10, Indian companies showed some resilience by posting almost flat to slightly negative growth in their top-lines. One of the real concerns for the industry was, however, the decline in volumes.
Even though, India’s largest IT services provider, Tata Consultancy Services (TCS), showed a volume growth of about 3.5 per cent, the volume for Infosys and Wipro declined by about 1 per cent and 1.5 per cent respectively. Thus reflecting the state of the affairs in the supply environment.
In the current quarter, while most of the companies are seeing a much better demand than the previous quarter, they are still maintaining a cautious approach owing to the US market, which is yet to come out of the downturn.
“We are not in a downturn now, even though we are not in a recovery phase. We have now come to a stable phase. The recovery will be late by the US market, and we will have to wait and see when this happens,” says S Mahalingam, chief financial officer of TCS.
The silver lining to the cloud is that some of the deals announced recently, including the estimated $1.5-billion BP outsourcing contract to three Indian IT vendors, reveal that clients are now opening up their purse strings to accommodate discretionary spending. In the current environment, according to analysts, clients may be ready to spend as many of them may want to exhaust their existing IT budgets before the year ends. The second reason is that they may be perceiving a better outlook for the overall economy.
“New projects or new business spending by companies had increased in the July-August-September quarter, which will definitely have a positive impact. But there’s no correlation as yet whether this will result in better margins and higher revenue,” cautions Sabyasachi Satpathy, partner, Tholons Advisory.
“The worst is getting over and we are currently moving from a stable to positive territory even though we are maintaining a cautious approach. Our funnel has gone up from the end of the first quarter to now,” says Suresh Senapaty, chief financial officer of Wipro Ltd. Wipro had given a cautious revenue guidance of 0.2 to 2 per cent for the second quarter of the current fiscal.
Outsourcing and offshoring are very critical for companies to become more operationally efficient and agile. But when recovery happens and the economy bounces back, the year-on-year growth rates of 30-40 per cent which IT firms enjoyed will be a thing of the past, since the base is very high.
“It might be around 20 per cent or so,” concludes Mahalingam of TCS.
Showing posts with label Outsourcing. Show all posts
Showing posts with label Outsourcing. Show all posts
Monday, August 31, 2009
Mahindra Satyam says it's chasing 30 large deals
Information technology services provider Mahindra Satyam is pursuing around 30 “large deals” and expects some of these to materialise during the current financial year, according to a senior official of the company.
“We are vigorously pursuing 20 to 30 large deals in the life sciences, public services, transportation and engineering domains, which are showing a lot of positive business momentum. We expect to close some of them to our advantage by this fiscal end,” the official told Business Standard, while declining to share the size of the deals.
A large deal, in normal IT parlance, is anywhere between $50 million (around Rs 245 crore) and $100 million (Rs 490 crore).
The scam-hit company, now logging on to the recovery path after Tech Mahindra acquired a controlling stake in it in April, has been seeing increasing business stability since then, winning over 30 new logos (customer wins), including the five-year SAP contract with global pharmaceutical major GlaxoSmithKline, the official added.
“The company has been witnessing high traction of business from emerging markets like India, Europe, Middle East and Asia (MEA) and the Asia Pacific. These new geographies are now accounting for close to 55 per cent of our business, while the contribution from the US is hovering around 45 per cent, a positive trend which is slowly beginning to grow and drive our revenues further,” he said.
On the company’s business processing outsourcing (BPO) arm’s recent major client win in Tata Docomo for providing back-office support, he said the company had already hired 1,000 professionals for its client. “Mahindra Satyam BPO will be adding 300 people every year over the next five years to service this telecom client,” the official added.
Mahindra Satyam, which had in June announced a one-time virtual pool programme aimed at addressing idle staff costs while retaining talent, had so far recalled 1,000 employees. “We will be calling back some more,” he added.
Mahindra Satyam stock ended the trade at Rs 113.85 on the BSE on Friday, down 0.52 per cent against the previous close of Rs 114.45.
“We are vigorously pursuing 20 to 30 large deals in the life sciences, public services, transportation and engineering domains, which are showing a lot of positive business momentum. We expect to close some of them to our advantage by this fiscal end,” the official told Business Standard, while declining to share the size of the deals.
A large deal, in normal IT parlance, is anywhere between $50 million (around Rs 245 crore) and $100 million (Rs 490 crore).
The scam-hit company, now logging on to the recovery path after Tech Mahindra acquired a controlling stake in it in April, has been seeing increasing business stability since then, winning over 30 new logos (customer wins), including the five-year SAP contract with global pharmaceutical major GlaxoSmithKline, the official added.
“The company has been witnessing high traction of business from emerging markets like India, Europe, Middle East and Asia (MEA) and the Asia Pacific. These new geographies are now accounting for close to 55 per cent of our business, while the contribution from the US is hovering around 45 per cent, a positive trend which is slowly beginning to grow and drive our revenues further,” he said.
On the company’s business processing outsourcing (BPO) arm’s recent major client win in Tata Docomo for providing back-office support, he said the company had already hired 1,000 professionals for its client. “Mahindra Satyam BPO will be adding 300 people every year over the next five years to service this telecom client,” the official added.
Mahindra Satyam, which had in June announced a one-time virtual pool programme aimed at addressing idle staff costs while retaining talent, had so far recalled 1,000 employees. “We will be calling back some more,” he added.
Mahindra Satyam stock ended the trade at Rs 113.85 on the BSE on Friday, down 0.52 per cent against the previous close of Rs 114.45.
TCS sees $30-100 mn BP deal revenue
Tata Consultancy Services (TCS) said it expects to get $30 million-100 million revenue on an annualised basis over the next three-five years from its recently won deal with BP.
Talking about the potential of the deal TCS Chief Executive Ramadorai said, "It could be anywhere around $30-100 million in the next three-five years."
To a query on when would revenue from the contract start flowing, he said, "I think it will start by the third quarter, in a small way but more importantly by next year."
TCS was one of the outsourcing firms that won five-year IT contracts from oil and gas major BP earlier this week. TCS had been selected for engagements in refining, manufacturing and corporate IT with opportunities across fuel value chain including upstream and trading.
Talking about the potential of the deal TCS Chief Executive Ramadorai said, "It could be anywhere around $30-100 million in the next three-five years."
To a query on when would revenue from the contract start flowing, he said, "I think it will start by the third quarter, in a small way but more importantly by next year."
TCS was one of the outsourcing firms that won five-year IT contracts from oil and gas major BP earlier this week. TCS had been selected for engagements in refining, manufacturing and corporate IT with opportunities across fuel value chain including upstream and trading.
Friday, August 28, 2009
Wipro, Lavasa tie-up for ICT may result in $100 mn revenue
IT services provider Wipro has tied up with Lavasa Corp for planning, implementing and managing ICT services across Lavasa hill city, which could result in revenues of up to $100 million over the next 10 years.
The strategic partnership (on Information & Communication Technology) will focus on providing integrated and effective solutions for enhancing IT operations within the Hill city, a press release said.
“It will also provide the necessary infrastructure support including technology selection, supply, installation and management of platforms, networks and data centre. The estimated revenues out of this partnership from Lavasa city’s first town Dasve is about $100 million over the next 10 years,” it added.
Lavasa, spread over 12,500 acres, is a hill city complete with education, hospitality and health care services currently being developed by Hindustan Construction Company.
Wipro will design the detailed infrastructure for telecom services for governance.
It will also provide telecom-based services to facilitate smart homes, provide physical security requirements and other on-demand services.
The ICT services include voice-video-data services to various businesses operating in the hill city.
The strategic partnership (on Information & Communication Technology) will focus on providing integrated and effective solutions for enhancing IT operations within the Hill city, a press release said.
“It will also provide the necessary infrastructure support including technology selection, supply, installation and management of platforms, networks and data centre. The estimated revenues out of this partnership from Lavasa city’s first town Dasve is about $100 million over the next 10 years,” it added.
Lavasa, spread over 12,500 acres, is a hill city complete with education, hospitality and health care services currently being developed by Hindustan Construction Company.
Wipro will design the detailed infrastructure for telecom services for governance.
It will also provide telecom-based services to facilitate smart homes, provide physical security requirements and other on-demand services.
The ICT services include voice-video-data services to various businesses operating in the hill city.
Indian outsourcing majors in talks for $1 billion Exxon deal: report
ExxonMobil is in talks with Indian technology firms including L&T Infotech and HCL Technologies Ltd. and multinational vendors to outsource IT contracts worth up to $1 billion, the Economic Times reported on its Web site Friday, citing a U.S.-based person familiar with ExxonMobil's outsourcing strategy.
"The discussions are at an early stage. However, ExxonMobil wants to work with fewer, large and medium-sized vendors at lower rates," the Web site quoted the person, who spoke on condition of anonymity, as saying.
"The discussions are at an early stage. However, ExxonMobil wants to work with fewer, large and medium-sized vendors at lower rates," the Web site quoted the person, who spoke on condition of anonymity, as saying.
Wipro wins Fosters' contract
Wipro, India’s third biggest software exporter, has won a new outsourcing contract estimated to be worth around $100 million from Australia's biggest brewer Fosters.
The contract involves managing and supporting Fosters IT infrastructure, data centres and different business applications across Australia, US and UK.
Having won several large deals including a contract from Origin Energy in Australia’s over $6.5 billion outsourcing market, Wipro continues to increase its footprint in the country.
When contacted by ET on Thursday, a Fosters spokesman confirmed the transaction. A Wipro spokeswoman had not responded to an email query sent by ET on Thursday morning.
"Fosters and Wipro are in discussions regarding global IT infrastructure services, data centre and applications support. The discussions are part of ongoing business efficiency initiatives. Wipro was chosen after a comprehensive tender and offer the capability to service our global operations and deliver significant costs savings with a combination of online, telephone and field staff services," said Troy Hey, Fosters Spokesman.
Fosters is already in the process of shifting members of its internal IT team.
"We are currently discussing transition arrangements with our people. Employees impacted by this approach in Australia, the United States and the UK will be offered alternative roles where available or provided full redundancy payments and career transition support," Mr Hey added.
Meanwhile, Fosters is not planning to outsource any back office and call centre jobs as part of this transaction.
"Discussions are limited to internal Information Technology services and all customer and consumer call centre services remain managed by Fosters teams in Australia, the United States and the UK," Mr Hey added.
At a time when new business is increasingly becoming tough to come by, Australia has emerged as a great opportunity for the outsourcing vendors. Other recent outsourcing contracts awarded by Australian companies include the $1.2 billion deal from Telstra and the over $100-million contract from Origin Energy.
The contract involves managing and supporting Fosters IT infrastructure, data centres and different business applications across Australia, US and UK.
Having won several large deals including a contract from Origin Energy in Australia’s over $6.5 billion outsourcing market, Wipro continues to increase its footprint in the country.
When contacted by ET on Thursday, a Fosters spokesman confirmed the transaction. A Wipro spokeswoman had not responded to an email query sent by ET on Thursday morning.
"Fosters and Wipro are in discussions regarding global IT infrastructure services, data centre and applications support. The discussions are part of ongoing business efficiency initiatives. Wipro was chosen after a comprehensive tender and offer the capability to service our global operations and deliver significant costs savings with a combination of online, telephone and field staff services," said Troy Hey, Fosters Spokesman.
Fosters is already in the process of shifting members of its internal IT team.
"We are currently discussing transition arrangements with our people. Employees impacted by this approach in Australia, the United States and the UK will be offered alternative roles where available or provided full redundancy payments and career transition support," Mr Hey added.
Meanwhile, Fosters is not planning to outsource any back office and call centre jobs as part of this transaction.
"Discussions are limited to internal Information Technology services and all customer and consumer call centre services remain managed by Fosters teams in Australia, the United States and the UK," Mr Hey added.
At a time when new business is increasingly becoming tough to come by, Australia has emerged as a great opportunity for the outsourcing vendors. Other recent outsourcing contracts awarded by Australian companies include the $1.2 billion deal from Telstra and the over $100-million contract from Origin Energy.
Thursday, August 27, 2009
India outsourcing workers stressed to the limit
The outsourcing industry has brought jobs and prosperity to India - but, asks Saritha Rai, at what cost to workers' well being?
The cheery, chatty voice at the other end of your customer care helpline may be a stressed-out, sleep-deprived and depressed twenty-something in Bangalore.
As many young people in India's outsourcing industry are beginning to discover, underneath the heady promise of an exciting job, a good paycheck and attractive career prospects lie long spells of night shifts, ruthless targets and the dreadful monotony of writing code or pacifying angry customers.
The outsourcing industry has long been hailed as a key driver to India's rise as a global economic power. Now, that growth is beginning to take its toll on its workers who labour for long hours in stressful work environments to meet tight deadlines for customers thousands of miles away.
Workers are suffering from obesity, sleep disorders, depression and broken relationships - problems which can lead to more serious conditions such as diabetes or heart disease. In a country where a public healthcare system is virtually non-existent, overworked outsourcing employees could present a health crisis in the making.
The troubles have worsened since the start of the global economic downturn last year. Employees are now particularly worried about job security. They watch anxiously as colleagues get axed from their jobs and their own salaries get slashed.
Karuna Baskar, director at 1to1help.net, a Bangalore-based counseling firm, says there is a recent rise in the number of workers coming in with mental issues like depression, bi-polar disorder and suicidal tendencies.
Many workers struggle to make the transition from the college campus to the office environment and find they cannot cope with the stress, says Aashu Calapa, executive vice president of human resources for outsourcing firm Firstsource Solutions. The industry loses a slice of its workers solely to work stress, he says.
Ash (not his real name), an employee with a multinational firm's captive outsourced unit in Bangalore, has just been discharged from a week's stay in the hospital. Ironically, he prides himself for being near-religious about eating correctly and getting adequate sleep and exercise.
But in the end, all it took was a schedule that went out-of-whack for a week for him to land up in the hospital with acute gastric problems. The doctors advised him to ease off alcohol and better manage work stress.
Ash, who has worked night shifts during his entire four-year career at the back office firm, believes he got away lightly.
His friends suffer from migraines, backaches, insomnia and anxiety attacks. The causes are a combination of long work hours, disrupted eating and sleeping schedules, a fondness for junk food and deadline pressure, he says.
Many outsourcing workers are in their early 20s, just out of college and in their first jobs, and often feel they are invincible. But partying, shopping and living a reckless life on new found economic freedom soon begin to take their toll.
During the weekends, to relieve a week's pressure at work and to keep up with peers, they often indulge in chain smoking and binge drinking.
Not everybody is tough enough to handle the pressure and the lifestyle. Along with health, the invariable casualty is family and relationships, says Baskar whose confidential counseling service sees a surfeit of 19- to 29-year-olds with issues like loneliness, relationship problems and marriage breakdowns.
Globalization and the outsourcing industry in particular have brought rapid and enormous changes in the culture of India cities such as Bangalore, Hyderabad and Pune. In the homes of outsourcing workers, clashes over the traditional system of arranged marriages and the working woman's domestic role are common.
The industry is concerned, says Firstsource's Calapa. Firstsource provides on-call counselors and quality checks on food served to workers - and is currently considering a proposal to offer workers options for their work hours and workdays.
Other companies are doing their bit too, providing counselors, doctors and nutritionists, as well as gym facilities and medical insurance. However, many young workers simply ignore the help available to them.
Outsourcing worker Ash looks back and rues that he entered the job market so young. He now thinks he would have liked to pursue graduate studies. But now he is in, he feels there is no quick exit from the outsourcing industry and wants to stay healthy and get ahead.
Originally posted on silicon.com
The cheery, chatty voice at the other end of your customer care helpline may be a stressed-out, sleep-deprived and depressed twenty-something in Bangalore.
As many young people in India's outsourcing industry are beginning to discover, underneath the heady promise of an exciting job, a good paycheck and attractive career prospects lie long spells of night shifts, ruthless targets and the dreadful monotony of writing code or pacifying angry customers.
The outsourcing industry has long been hailed as a key driver to India's rise as a global economic power. Now, that growth is beginning to take its toll on its workers who labour for long hours in stressful work environments to meet tight deadlines for customers thousands of miles away.
Workers are suffering from obesity, sleep disorders, depression and broken relationships - problems which can lead to more serious conditions such as diabetes or heart disease. In a country where a public healthcare system is virtually non-existent, overworked outsourcing employees could present a health crisis in the making.
The troubles have worsened since the start of the global economic downturn last year. Employees are now particularly worried about job security. They watch anxiously as colleagues get axed from their jobs and their own salaries get slashed.
Karuna Baskar, director at 1to1help.net, a Bangalore-based counseling firm, says there is a recent rise in the number of workers coming in with mental issues like depression, bi-polar disorder and suicidal tendencies.
Many workers struggle to make the transition from the college campus to the office environment and find they cannot cope with the stress, says Aashu Calapa, executive vice president of human resources for outsourcing firm Firstsource Solutions. The industry loses a slice of its workers solely to work stress, he says.
Ash (not his real name), an employee with a multinational firm's captive outsourced unit in Bangalore, has just been discharged from a week's stay in the hospital. Ironically, he prides himself for being near-religious about eating correctly and getting adequate sleep and exercise.
But in the end, all it took was a schedule that went out-of-whack for a week for him to land up in the hospital with acute gastric problems. The doctors advised him to ease off alcohol and better manage work stress.
Ash, who has worked night shifts during his entire four-year career at the back office firm, believes he got away lightly.
His friends suffer from migraines, backaches, insomnia and anxiety attacks. The causes are a combination of long work hours, disrupted eating and sleeping schedules, a fondness for junk food and deadline pressure, he says.
Many outsourcing workers are in their early 20s, just out of college and in their first jobs, and often feel they are invincible. But partying, shopping and living a reckless life on new found economic freedom soon begin to take their toll.
During the weekends, to relieve a week's pressure at work and to keep up with peers, they often indulge in chain smoking and binge drinking.
Not everybody is tough enough to handle the pressure and the lifestyle. Along with health, the invariable casualty is family and relationships, says Baskar whose confidential counseling service sees a surfeit of 19- to 29-year-olds with issues like loneliness, relationship problems and marriage breakdowns.
Globalization and the outsourcing industry in particular have brought rapid and enormous changes in the culture of India cities such as Bangalore, Hyderabad and Pune. In the homes of outsourcing workers, clashes over the traditional system of arranged marriages and the working woman's domestic role are common.
The industry is concerned, says Firstsource's Calapa. Firstsource provides on-call counselors and quality checks on food served to workers - and is currently considering a proposal to offer workers options for their work hours and workdays.
Other companies are doing their bit too, providing counselors, doctors and nutritionists, as well as gym facilities and medical insurance. However, many young workers simply ignore the help available to them.
Outsourcing worker Ash looks back and rues that he entered the job market so young. He now thinks he would have liked to pursue graduate studies. But now he is in, he feels there is no quick exit from the outsourcing industry and wants to stay healthy and get ahead.
Originally posted on silicon.com
TCS, Infosys, Wipro bag big chunk of BP's 5-year IT deal
Country's top three IT companies TCS, Infosys and Wipro today bagged a seizable chunk of five- year outsourcing deal from British oil Spokepersons of all three companies did not disclose the size when asked whether the total deal size is worth $ 1.5 bn (approximately Rs 7,500 crore). They also did not reveal their independent size of the contract they have won.
The multi-crore rupee contract is a big boost for the domestic outsourcing majors, currently under pricing and margin pressure in the wake of gloabl downturn.
Global IT majors IBM and Accenture have also has snapped a part of the deal. The three companies announced separately that they have entered into an outsourcing deal with BP.
Infosys said it will operate BP's business systems. Wipro said it will provide IT Application Development and Application Maintenance (ADAM) services for BP's Fuels Value Chain and corporate business globally.
TCS said it has been selected for engagements in refining, manufacturing and corporate IT with opportunities across fuels value chain including upstream and trading.
As part of the deal, IBM will manage and run the oil giant's enterprise applications and integrated service desk responsibilities, IBM said.
The big three closed up in the range of 2-4 per cent on BSE after the news of them bagging the deal broke out.
The multi-crore rupee contract is a big boost for the domestic outsourcing majors, currently under pricing and margin pressure in the wake of gloabl downturn.
Global IT majors IBM and Accenture have also has snapped a part of the deal. The three companies announced separately that they have entered into an outsourcing deal with BP.
Infosys said it will operate BP's business systems. Wipro said it will provide IT Application Development and Application Maintenance (ADAM) services for BP's Fuels Value Chain and corporate business globally.
TCS said it has been selected for engagements in refining, manufacturing and corporate IT with opportunities across fuels value chain including upstream and trading.
As part of the deal, IBM will manage and run the oil giant's enterprise applications and integrated service desk responsibilities, IBM said.
The big three closed up in the range of 2-4 per cent on BSE after the news of them bagging the deal broke out.
Infosys, Wipro bag 5-yr BP deal
Indian outsourcers Infosys Technologies Ltd and Wipro Ltd bagged five-year outsourcing deal from oil and gas firm BP.
Under the terms of the deal, Infosys will operate a large portion of BP's business systems. No financial details were available.
Kris Gopalakrishnan, CEO and Managing Director, Infosys Technologies, said, “Infosys has a long standing relationship with BP, delivering consulting and technology services. We are well positioned to use our global sourcing expertise and transformational capabilities in the oil and gas domain.”
Under the five-year agreement with BP, Wipro will provide IT applications development and maintenance services for the company’s fuel and corporate businesses globally.
Earlier last week, Infosys Technologies said that it has bid for more than 10 large government projects in India as part of a drive to lower its dependence on the US market.
Infosys, which gets more than half its business from the United States, plans to generate $1 billion in revenue from the Indian market in 2-3 years versus an insignificant level now, the head of its India business unit said.
"There are large opportunities in India. So we are definitely going to go after these kinds of businesses very aggressively in India," Binod Rangadore said. "We have a very healthy pipeline right now."
The market for technology and business outsourcing services in India is expected to expand five-fold by 2020 to $90 billion to $100 billion on the back of a growing economy, according to a recent study by lobby group NASSCOM and consultancy McKinsey.
Outsourcing firms such as Infosys and bigger rival Tata Consultancy Services are tapping new markets such as India, China, Japan and countries in Europe to beat a recession in the United States.
The Indian firms face competition from big global players such as IBM Inc, Hewlett-Packard and Accenture that have raided their home turf as they look for growth outside their mature markets.
Under the terms of the deal, Infosys will operate a large portion of BP's business systems. No financial details were available.
Kris Gopalakrishnan, CEO and Managing Director, Infosys Technologies, said, “Infosys has a long standing relationship with BP, delivering consulting and technology services. We are well positioned to use our global sourcing expertise and transformational capabilities in the oil and gas domain.”
Under the five-year agreement with BP, Wipro will provide IT applications development and maintenance services for the company’s fuel and corporate businesses globally.
Earlier last week, Infosys Technologies said that it has bid for more than 10 large government projects in India as part of a drive to lower its dependence on the US market.
Infosys, which gets more than half its business from the United States, plans to generate $1 billion in revenue from the Indian market in 2-3 years versus an insignificant level now, the head of its India business unit said.
"There are large opportunities in India. So we are definitely going to go after these kinds of businesses very aggressively in India," Binod Rangadore said. "We have a very healthy pipeline right now."
The market for technology and business outsourcing services in India is expected to expand five-fold by 2020 to $90 billion to $100 billion on the back of a growing economy, according to a recent study by lobby group NASSCOM and consultancy McKinsey.
Outsourcing firms such as Infosys and bigger rival Tata Consultancy Services are tapping new markets such as India, China, Japan and countries in Europe to beat a recession in the United States.
The Indian firms face competition from big global players such as IBM Inc, Hewlett-Packard and Accenture that have raided their home turf as they look for growth outside their mature markets.
Wednesday, August 26, 2009
IBM bags Nomura's IT services deal
IBM announced that Nomura Services India Private Limited, a subsidiary of leading financial services group Nomura, would implement IBM's end-to-end business continuity and resiliency services to bolster its business continuity, disaster and system failure response strategies.
The multi-year IT services agreement would also provide Nomura Services with an in-city work area recovery solution to recover critical business functions in the event of an interruption at a primary site, an IBM press release said.
"This will help Nomura Services effectively respond to crisis scenarios that may have the potential of causing major disruption to its business", it said.
The multi-year IT services agreement would also provide Nomura Services with an in-city work area recovery solution to recover critical business functions in the event of an interruption at a primary site, an IBM press release said.
"This will help Nomura Services effectively respond to crisis scenarios that may have the potential of causing major disruption to its business", it said.
Tuesday, August 25, 2009
TechM bags Etisalat contract
Gets a portion of Rs 1,500-crore IT outsourcing deal from the UAE firm
IT solutions provider Tech Mahindra is understood to have bagged a majority portion of the Rs 1,500-crore telecom IT outsourcing deal from new operator Etisalat DB Telecom India, pipping seven other IT vendors like Wipro Technologies and IBM to the post. The deal is expected to be announced soon.
The UAE-based telecom giant Etisalat holds a 45 per cent stake in Etisalat DB Telecom India (formerly Swan Telecom).
A Letter of Intent (LoI) regarding the contract has been awarded to Tech Mahindra, while the company is yet to respond to this.
When contacted, a senior executive at Tech Mahindra said: “We do not comment on market speculation.” Executives at Etisalat DB Telecom India and Wipro Technologies also declined to comment.
Tech Mahindra has been finalised for customer billing solutions, which comprises around 50-60 per cent of the total IT contract.
The technology part of the deal is yet to be finalised, for which IBM, Tech Mahindra, Wipro Technologies and Chinese vendor ZTE Corporation are in the race, a source close to the development told Business Standard.
According to a Mumbai-based analyst, Tech Mahindra winning the deal might not come as a surprise as Etisalat had earlier awarded an outsourcing contract to the solutions provider. Tech Mahindra, jointly with Sony Ericsson, had won Etisalat’s Egypt outsourcing contract in February last year.
Indian telecom providers have been increasingly outsourcing their IT infrastructure, as it would enable them to be asset-light and concentrate on their core competencies.
While the trend was started by Bharti-Airtel’s deal with IBM which has now risen to over $2 billion, most of the telecom players have opted for outsourcing.
Recently, Wipro won a Rs 2,500-crore deal from Unitech Wireless.
In January 2008, Aircel Cellular had awarded a $600-million deal to Wipro, while Aditya Birla group company Idea Cellular had signed a 10-year IT outsourcing deal with IBM. Idea Cellular’s deal was estimated to be around $600-800 million.
IT solutions provider Tech Mahindra is understood to have bagged a majority portion of the Rs 1,500-crore telecom IT outsourcing deal from new operator Etisalat DB Telecom India, pipping seven other IT vendors like Wipro Technologies and IBM to the post. The deal is expected to be announced soon.
The UAE-based telecom giant Etisalat holds a 45 per cent stake in Etisalat DB Telecom India (formerly Swan Telecom).
A Letter of Intent (LoI) regarding the contract has been awarded to Tech Mahindra, while the company is yet to respond to this.
When contacted, a senior executive at Tech Mahindra said: “We do not comment on market speculation.” Executives at Etisalat DB Telecom India and Wipro Technologies also declined to comment.
Tech Mahindra has been finalised for customer billing solutions, which comprises around 50-60 per cent of the total IT contract.
The technology part of the deal is yet to be finalised, for which IBM, Tech Mahindra, Wipro Technologies and Chinese vendor ZTE Corporation are in the race, a source close to the development told Business Standard.
According to a Mumbai-based analyst, Tech Mahindra winning the deal might not come as a surprise as Etisalat had earlier awarded an outsourcing contract to the solutions provider. Tech Mahindra, jointly with Sony Ericsson, had won Etisalat’s Egypt outsourcing contract in February last year.
Indian telecom providers have been increasingly outsourcing their IT infrastructure, as it would enable them to be asset-light and concentrate on their core competencies.
While the trend was started by Bharti-Airtel’s deal with IBM which has now risen to over $2 billion, most of the telecom players have opted for outsourcing.
Recently, Wipro won a Rs 2,500-crore deal from Unitech Wireless.
In January 2008, Aircel Cellular had awarded a $600-million deal to Wipro, while Aditya Birla group company Idea Cellular had signed a 10-year IT outsourcing deal with IBM. Idea Cellular’s deal was estimated to be around $600-800 million.
Saturday, August 22, 2009
SAS hires Accenture in 7-year outsourcing deal
Scandinavian Airlines Awards Finance and Accounting Business Process Outsourcing Contract to Accenture
Accenture (NYSE: ACN: 35.45, -0.9, -2.48%) will provide Scandinavian Airlines (SAS) with finance and accounting (F&A) business services in Western Europe under a seven-year business process outsourcing (BPO) agreement.
The services Accenture covers include accounts payable, accounts receivable and accounting to reporting. Accenture will provide the services to SAS in 14 countries across Western Europe; mainly in Sweden, Norway, Denmark and the United Kingdom. The services will be delivered through Accenture's Global Delivery Network from its delivery center in Delhi, India.
"The work being performed by Accenture is part of SAS's new strategy "Core SAS" that is designed to deliver annual savings through a streamlined and simplified operating model," said Sara Jinnerot, VP at SAS Accounting Services. "We selected Accenture because of their ability to provide a qualitative and cost effective solution. Accenture has a proven track record of delivering similar services".
"We are proud to have been selected to support SAS. The contract agreement will deliver cost-effective solutions and a standardized process for the finance and accounting services and further strengthens our position in the airline industry, says Patrik Bjorkler, a senior executive in Accenture's Nordic outsourcing practice.
Accenture (NYSE: ACN: 35.45, -0.9, -2.48%) will provide Scandinavian Airlines (SAS) with finance and accounting (F&A) business services in Western Europe under a seven-year business process outsourcing (BPO) agreement.
The services Accenture covers include accounts payable, accounts receivable and accounting to reporting. Accenture will provide the services to SAS in 14 countries across Western Europe; mainly in Sweden, Norway, Denmark and the United Kingdom. The services will be delivered through Accenture's Global Delivery Network from its delivery center in Delhi, India.
"The work being performed by Accenture is part of SAS's new strategy "Core SAS" that is designed to deliver annual savings through a streamlined and simplified operating model," said Sara Jinnerot, VP at SAS Accounting Services. "We selected Accenture because of their ability to provide a qualitative and cost effective solution. Accenture has a proven track record of delivering similar services".
"We are proud to have been selected to support SAS. The contract agreement will deliver cost-effective solutions and a standardized process for the finance and accounting services and further strengthens our position in the airline industry, says Patrik Bjorkler, a senior executive in Accenture's Nordic outsourcing practice.
Friday, August 21, 2009
Infosys, Satyam vie for $200 mn deal
Bombardier, the world’s third biggest aircraft maker, has invited tech vendors to bid for an outsourcing contract potentially worth up to $200 million over next few years, as the company seeks to increase outsourcing of design projects in order to lower its operational costs.
While Mahindra Satyam and Capgemini already work with Bombardier and are in discussions with the aircraft maker for this contract, India’s second biggest software exporter Infosys and smaller rival QuEST Global are also pursuing this opportunity.
The contract will involve engineering design projects for Bombardier’s CSeries jetliners being procured by Lease Corp. International Aviation and Lufthansa are in transactions worth over $3 billion.
From around $1.8 billion currently, India’s engineering services outsourcing (ESO) market is expected to reach $50 billion over the next ten years as more aviation and manufacturing companies seek to lower their design costs by outsourcing to the country.
When contacted, a Bombardier spokesperson declined to provide any specific details of this contract. “Bombardier Aerospace is active in India through associations with Capgemini and Mahindra Satyam in Bangalore since 2005. Bombardier Aerospace in its normal course of business continues to hold exploratory discussions with several entities located around the world to address various business opportunities,” said Marc Duchesne, Manager, Public Affairs & Senior spokesperson, Bombardier Aerospace.
Apart from smaller focused firms such as Infotech Enterprises and QuEST Global, large Indian software firms including TCS, Infosys and HCL have been attempting to increase their revenues from aviation design projects.
While Infosys would not comment on any specific customer, a person familiar with the company’s strategies told on conditions of anonymity that Infosys is among vendors bidding for the Bombardier contract. “Infosys is in conversation with Bombardier which is the main OEM among the four to five big players in this market. Bombardier’s future road map is throwing up an enormous potential as they have formed the blueprint for C-Series,” he said.
Companies such as Infosys now want a bigger pie of the outsourcing contract, which will include some portion of mechanical engineering design work as well.
“Bombardier is looking for design work for metallic and composite structures to be done in India which also includes work like floor panels, la
nding gears, doors, fuselage, wings. Infosys is looking for complete package rather then doing work for one part or another,” the person added.
Aviation customers are increasingly looking at sourcing design and other IT projects from India not necessarily for cost savings, but also because the country offers a pool of skilled engineers who understand complex avionics.
“QuEST Global has typically provided our customers with cost savings from 20% to 40%, in business models where we setup a dedicated engineering team for them consisting of at least 20-25 engineers providing a similar range of services. These kind of cost savings can be achieved in a period of 18 to 24 months from the setup of operations,” said Bejoy George, chief marketing officer of QuEST.
Two of the world’s biggest aircraft makers Airbus and Boeing have been outsourcing to India-based vendors over past many years. Boeing awarded a deal to HCL Technologies to develop software for its 787 Dreamliner and has also formed collaborations with several institutions such as IISc, IIT and National Aeronautical Laboratory, for development of futuristic aerospace technology.
Hindustan Aeronautics Limited (HAL) is developing components for Airbus’s A380, including the doors. QuEST on other hand is making the components that go in to the landing gears of aircraft’s made by Airbus and Boeing.
While Mahindra Satyam and Capgemini already work with Bombardier and are in discussions with the aircraft maker for this contract, India’s second biggest software exporter Infosys and smaller rival QuEST Global are also pursuing this opportunity.
The contract will involve engineering design projects for Bombardier’s CSeries jetliners being procured by Lease Corp. International Aviation and Lufthansa are in transactions worth over $3 billion.
From around $1.8 billion currently, India’s engineering services outsourcing (ESO) market is expected to reach $50 billion over the next ten years as more aviation and manufacturing companies seek to lower their design costs by outsourcing to the country.
When contacted, a Bombardier spokesperson declined to provide any specific details of this contract. “Bombardier Aerospace is active in India through associations with Capgemini and Mahindra Satyam in Bangalore since 2005. Bombardier Aerospace in its normal course of business continues to hold exploratory discussions with several entities located around the world to address various business opportunities,” said Marc Duchesne, Manager, Public Affairs & Senior spokesperson, Bombardier Aerospace.
Apart from smaller focused firms such as Infotech Enterprises and QuEST Global, large Indian software firms including TCS, Infosys and HCL have been attempting to increase their revenues from aviation design projects.
While Infosys would not comment on any specific customer, a person familiar with the company’s strategies told on conditions of anonymity that Infosys is among vendors bidding for the Bombardier contract. “Infosys is in conversation with Bombardier which is the main OEM among the four to five big players in this market. Bombardier’s future road map is throwing up an enormous potential as they have formed the blueprint for C-Series,” he said.
Companies such as Infosys now want a bigger pie of the outsourcing contract, which will include some portion of mechanical engineering design work as well.
“Bombardier is looking for design work for metallic and composite structures to be done in India which also includes work like floor panels, la
nding gears, doors, fuselage, wings. Infosys is looking for complete package rather then doing work for one part or another,” the person added.
Aviation customers are increasingly looking at sourcing design and other IT projects from India not necessarily for cost savings, but also because the country offers a pool of skilled engineers who understand complex avionics.
“QuEST Global has typically provided our customers with cost savings from 20% to 40%, in business models where we setup a dedicated engineering team for them consisting of at least 20-25 engineers providing a similar range of services. These kind of cost savings can be achieved in a period of 18 to 24 months from the setup of operations,” said Bejoy George, chief marketing officer of QuEST.
Two of the world’s biggest aircraft makers Airbus and Boeing have been outsourcing to India-based vendors over past many years. Boeing awarded a deal to HCL Technologies to develop software for its 787 Dreamliner and has also formed collaborations with several institutions such as IISc, IIT and National Aeronautical Laboratory, for development of futuristic aerospace technology.
Hindustan Aeronautics Limited (HAL) is developing components for Airbus’s A380, including the doors. QuEST on other hand is making the components that go in to the landing gears of aircraft’s made by Airbus and Boeing.
Indian IT companies may have to hire more UK staff
UK, one of the top export markets for India’s over $40-billion software industry, is evaluating stricter immigration rules proposed by the Migration Advisory Committee (MAC) after several British trade lobbyists and workers alleged that Indian tech firms are replacing local workers with overseas staff at lower salary levels.
Top Indian tech firms including TCS, Infosys, Wipro and Tech Mahindra serve British customers such as BT, British Petroleum and British Airways by sending Indian professionals to the country on short-term project assignments. With more stringent norms, these companies may have to employ more local UK workers instead of sending their Indian staff for onsite projects.
Anti-offshoring lobbies including Unite and the Association of Professional Staffing Companies (APSCo) allege that Indian tech firms are misusing the ‘intra-company-transfer’ rules by replacing UK workers at wages lower than prescribed levels in the country.
The MAC report submitted by the committee’s chairman Professor David Metcalf to UK’s Home Office on Wednesday has recommended that the threshold salary levels for allowing entry of a graduate skilled worker be raised from around £17,000 currently, making it tougher to earn points needed for allocation of work permits.
“We believe that the earnings thresholds should rise in line with earnings inflation. We recommend raising the minimum threshold for gaining 10 points to £24,000 per annum, and raising the minimum threshold for gaining 15 points to £28,000 per annum,” the MAC report added. These figures compare to £20,000 and £22,000, respectively, under the current system.
Last year, UK granted around 45,766 work permits to workers coming to the country through intra-company-transfer route, a majority of them awarded to the IT professionals. The majority of intracompany transfers are for Indian nationals, who account for 69% of the permits granted through this route.
Almost half (48%) of intra-company transfers are for Indian nationals in just one occupation — software professionals . “Companies are even allowed to pay these workers offshore in foreign currencies, so intra company transfers are potentially very easy to exploit in order to bring cheap foreign labour into the UK,” Ann Swain, chief executive of APSCo said in a recent statement.
Nasscom, the Indian software industry lobby, said the recommendations will help fix the loopholes in the system. “There were some cases of abuse reported in the past and the new norms ensure compliance to guidelines and there is a system in place to audit the visa process,” said Som Mittal, president of Nasscom. “The issue of salary — at least £20,000 a year as minimum wage for an employee going to the UK is also acceptable as less than 0.2% of the current ICT employees going to the UK are at a salary less than that. This measure has been put in place to check abuse,” he added.
The report also recommends that migrants coming to UK under intracompany-transfer route cannot have a right to permanent residence. “Because the intra-company transfer route exists to facilitate temporary immigration to the UK, we recommend that time spent in the UK under this route does not lead to a right to permanent residence,” the report said. Under the current rules, after five years of working in the UK on the intra-company transfer route or any other route under tier-II, it is possible to be granted permanent residence.
Meanwhile, Indian IT workers in UK feel such recommendations are not required. “Tier-II visas without the right to settlement will lead to exploitation of skilled professionals who will have to pay taxes but will not be able to settle in the UK,” said Amit Kapadia, executive director of the Highly Skilled Migrant Programme (HSMP) Forum in UK. “In recommending so we believe the MAC has gone beyond its scope in answering the questions which were raised by the then home secretary Jackie Smith,” he added.
Experts such as Bob McDowall, who is the research director with Tower-Group said these allegations are true. “The wages are lower than the UK minimum wage, though there remains a substantial cost of living differential between India and the UK,” he said. The backlash, according to him, is set to gain more momentum because of the rising unemployment. Moreover, IT workers coming to UK for short-term projects will also need to have more work experience. “To ensure that the route allows only people with company-specific expertise to come to the UK, we believe that the qualifying period with the company overseas should be doubled from the current six months to 12 months.”
However, MAC’s recommendations are pure advisory and the Home Office may or may not accept them. “We need to remember that these are recommendations at this stage and the government is considering the report before responding formally. No decisions have been taken and it’s too early to speculate on the government’s response ,” Chris Dix, regional director South Asia and the Gulf, UK Border Agency, told ET on Thursday.
Source: EconomicTimes
Top Indian tech firms including TCS, Infosys, Wipro and Tech Mahindra serve British customers such as BT, British Petroleum and British Airways by sending Indian professionals to the country on short-term project assignments. With more stringent norms, these companies may have to employ more local UK workers instead of sending their Indian staff for onsite projects.
Anti-offshoring lobbies including Unite and the Association of Professional Staffing Companies (APSCo) allege that Indian tech firms are misusing the ‘intra-company-transfer’ rules by replacing UK workers at wages lower than prescribed levels in the country.
The MAC report submitted by the committee’s chairman Professor David Metcalf to UK’s Home Office on Wednesday has recommended that the threshold salary levels for allowing entry of a graduate skilled worker be raised from around £17,000 currently, making it tougher to earn points needed for allocation of work permits.
“We believe that the earnings thresholds should rise in line with earnings inflation. We recommend raising the minimum threshold for gaining 10 points to £24,000 per annum, and raising the minimum threshold for gaining 15 points to £28,000 per annum,” the MAC report added. These figures compare to £20,000 and £22,000, respectively, under the current system.
Last year, UK granted around 45,766 work permits to workers coming to the country through intra-company-transfer route, a majority of them awarded to the IT professionals. The majority of intracompany transfers are for Indian nationals, who account for 69% of the permits granted through this route.
Almost half (48%) of intra-company transfers are for Indian nationals in just one occupation — software professionals . “Companies are even allowed to pay these workers offshore in foreign currencies, so intra company transfers are potentially very easy to exploit in order to bring cheap foreign labour into the UK,” Ann Swain, chief executive of APSCo said in a recent statement.
Nasscom, the Indian software industry lobby, said the recommendations will help fix the loopholes in the system. “There were some cases of abuse reported in the past and the new norms ensure compliance to guidelines and there is a system in place to audit the visa process,” said Som Mittal, president of Nasscom. “The issue of salary — at least £20,000 a year as minimum wage for an employee going to the UK is also acceptable as less than 0.2% of the current ICT employees going to the UK are at a salary less than that. This measure has been put in place to check abuse,” he added.
The report also recommends that migrants coming to UK under intracompany-transfer route cannot have a right to permanent residence. “Because the intra-company transfer route exists to facilitate temporary immigration to the UK, we recommend that time spent in the UK under this route does not lead to a right to permanent residence,” the report said. Under the current rules, after five years of working in the UK on the intra-company transfer route or any other route under tier-II, it is possible to be granted permanent residence.
Meanwhile, Indian IT workers in UK feel such recommendations are not required. “Tier-II visas without the right to settlement will lead to exploitation of skilled professionals who will have to pay taxes but will not be able to settle in the UK,” said Amit Kapadia, executive director of the Highly Skilled Migrant Programme (HSMP) Forum in UK. “In recommending so we believe the MAC has gone beyond its scope in answering the questions which were raised by the then home secretary Jackie Smith,” he added.
Experts such as Bob McDowall, who is the research director with Tower-Group said these allegations are true. “The wages are lower than the UK minimum wage, though there remains a substantial cost of living differential between India and the UK,” he said. The backlash, according to him, is set to gain more momentum because of the rising unemployment. Moreover, IT workers coming to UK for short-term projects will also need to have more work experience. “To ensure that the route allows only people with company-specific expertise to come to the UK, we believe that the qualifying period with the company overseas should be doubled from the current six months to 12 months.”
However, MAC’s recommendations are pure advisory and the Home Office may or may not accept them. “We need to remember that these are recommendations at this stage and the government is considering the report before responding formally. No decisions have been taken and it’s too early to speculate on the government’s response ,” Chris Dix, regional director South Asia and the Gulf, UK Border Agency, told ET on Thursday.
Source: EconomicTimes
Thursday, August 20, 2009
CA to increase R&D headcount by 1,000
CA India, the domestic arm of global information technology giant CA, is ramping up operations at its India Technology Centre (ITC). The campus, which has the capacity to house 1,500 employees at present, wou-ld be expanded to accommodate 2,500 people in the coming three years.
The ITC, which was set up in 2004 as a cost cutting initiative, has emerged as the premier research and development (R&D) centre for CA. Presently, the unit is responsible for 28 per cent of all R&D work taking place in the company. This figure is set to rise to 70 per cent over the next three to five years, according to William Bauman, senior vice-president and general manager.
“Like all multi-national IT companies, we had started our India operations to reduce costs. But over the last five years, operations here have come a long way and are making major contributions to the overall R&D in the company,” he told Financial Chronicle.
CA spends about $700 million designing and supporting software that will govern, manage and secure IT environments. The company invests about 20 per cent of its revenue in R&D. “More than 25 per cent of CA’s globally-distributed R&D workforce is already in India. With an additional 1,000 people this percentage will grow to over the global tech industry R&D average,” Bauman claimed.
A total of 43 ideas were gathered from various CA centres all over the world by July 2009, of which seven were shortlisted for integrating with the company’s existing products. The company also decided to fund two more ideas which could be translated into separate business plans.
Bauman asserts that the success of the ITC project shows how effective outsourcing of IT talent has been for US IT majors. He believes that the profits made by American companies through outsourcing would defeat any protectionist policies that the present government may be planning to implement.
“Talking of moving jobs to Buffalo from Bangalore may sound nice. But one has to consider if Buffalo has the same kind of IT manpower to take care of US companies’ IT requirements,” Bauman sums up.
The ITC, which was set up in 2004 as a cost cutting initiative, has emerged as the premier research and development (R&D) centre for CA. Presently, the unit is responsible for 28 per cent of all R&D work taking place in the company. This figure is set to rise to 70 per cent over the next three to five years, according to William Bauman, senior vice-president and general manager.
“Like all multi-national IT companies, we had started our India operations to reduce costs. But over the last five years, operations here have come a long way and are making major contributions to the overall R&D in the company,” he told Financial Chronicle.
CA spends about $700 million designing and supporting software that will govern, manage and secure IT environments. The company invests about 20 per cent of its revenue in R&D. “More than 25 per cent of CA’s globally-distributed R&D workforce is already in India. With an additional 1,000 people this percentage will grow to over the global tech industry R&D average,” Bauman claimed.
A total of 43 ideas were gathered from various CA centres all over the world by July 2009, of which seven were shortlisted for integrating with the company’s existing products. The company also decided to fund two more ideas which could be translated into separate business plans.
Bauman asserts that the success of the ITC project shows how effective outsourcing of IT talent has been for US IT majors. He believes that the profits made by American companies through outsourcing would defeat any protectionist policies that the present government may be planning to implement.
“Talking of moving jobs to Buffalo from Bangalore may sound nice. But one has to consider if Buffalo has the same kind of IT manpower to take care of US companies’ IT requirements,” Bauman sums up.
Infosys using new billing model
IT bellwether Infosys has started using a new billing system offering clients flexible schemes and protecting its margins.
Most of clients are now billed on the time and material based contracts (effort-based model) model under which Infosys charges a client based on the number of hours put in by the employees on a particular project. "We are pushing the new model across the client verticals. Over the next one-two years the company expects that about 5-10% of the revenue to come through the new model," Infosys senior VP and executive council member Subhash Dhar said.
In the last 6-9 months the company has signed 12-14 new clients under the new engagement model. "We have a large pipeline of deals under the new model," he said.
India's No. 2 software services exporter, is pursuing 12 to 15 deals worth $1 billion in this quarter, its chief executive said, amid hopes of a revival in outsourcing business momentum.
Hopes of a pickup in outsourcing demand, hit by the economic downturn, has soared after major Indian software services firms such as Infosys and sector leader Tata Consultancy Services Ltd smashed street estimates in their April-June earnings.
But export-driven outsourcers remain uncertain about a near-term earnings rebound, with Infosys forecasting its first annual revenue fall for the year to March 2010 on demand for fee cuts by its overseas clients.
Most of clients are now billed on the time and material based contracts (effort-based model) model under which Infosys charges a client based on the number of hours put in by the employees on a particular project. "We are pushing the new model across the client verticals. Over the next one-two years the company expects that about 5-10% of the revenue to come through the new model," Infosys senior VP and executive council member Subhash Dhar said.
In the last 6-9 months the company has signed 12-14 new clients under the new engagement model. "We have a large pipeline of deals under the new model," he said.
India's No. 2 software services exporter, is pursuing 12 to 15 deals worth $1 billion in this quarter, its chief executive said, amid hopes of a revival in outsourcing business momentum.
Hopes of a pickup in outsourcing demand, hit by the economic downturn, has soared after major Indian software services firms such as Infosys and sector leader Tata Consultancy Services Ltd smashed street estimates in their April-June earnings.
But export-driven outsourcers remain uncertain about a near-term earnings rebound, with Infosys forecasting its first annual revenue fall for the year to March 2010 on demand for fee cuts by its overseas clients.
Wednesday, August 19, 2009
HP May Be Backing Away From Its Outsourcing Business: Report
Hewlett-Packard (NYSE:HPQ) is considering selling or shutting down parts of its outsourcing business, which may include parts of its EDS business, acquired last year in a bid to better compete against IBM (NYSE:IBM), according to published reports.
HP CEO Mark Hurd is considering the move to pull back from HP's relatively low-margin business process outsourcing business, Reuters reported, citing unnamed sources.
"The calculation is, can we get more cash for this asset now vs. the cash flow the asset is expected to generate in coming years?" Reuters quoted one source it said was familiar with HP's plans.
More details may become available when HP reports its earnings on Tuesday afternoon. HP declined to talk about the possible change in its outsourcing business and about whether it would discuss such a change at its earnings call.
If true, the move would be a significant change for HP and its strategy of competing against archrival IBM with its acquisition last year of EDS.
HP acquired global integrator EDS last year for $13.9 billion in a bid to challenge IBM for global leadership in the services business. EDS at the time was one of the largest vendor-independent outsourced services companies in the world, and an integration partner of both HP and IBM.
The takeover of EDS was expected by HP to immediately make the combined company a formidable competitor against IBM in enterprise services. Prior to the acquisition, in the first quarter of 2008, HP's global services business generated $4.4 billion in revenue, compared to $14.6 billion for IBM.
IBM in the second quarter of 2009 reported global technology services revenue of $9.1 billion, down 10 percent from the previous year, and global business services of $4.3 billion, down 15 percent.
HP on Tuesday said its third quarter 2009 services revenue increased 93 percent to $8.5 billion, compared to the same quarter last year, due primarily to the EDS acquisition. This includes infrastructure technology outsourcing revenue of $3.9 billion, and a total revenue for technology services, application services and business process outsourcing of $4.5 billion.
Source: ChannelWeb
HP CEO Mark Hurd is considering the move to pull back from HP's relatively low-margin business process outsourcing business, Reuters reported, citing unnamed sources.
"The calculation is, can we get more cash for this asset now vs. the cash flow the asset is expected to generate in coming years?" Reuters quoted one source it said was familiar with HP's plans.
More details may become available when HP reports its earnings on Tuesday afternoon. HP declined to talk about the possible change in its outsourcing business and about whether it would discuss such a change at its earnings call.
If true, the move would be a significant change for HP and its strategy of competing against archrival IBM with its acquisition last year of EDS.
HP acquired global integrator EDS last year for $13.9 billion in a bid to challenge IBM for global leadership in the services business. EDS at the time was one of the largest vendor-independent outsourced services companies in the world, and an integration partner of both HP and IBM.
The takeover of EDS was expected by HP to immediately make the combined company a formidable competitor against IBM in enterprise services. Prior to the acquisition, in the first quarter of 2008, HP's global services business generated $4.4 billion in revenue, compared to $14.6 billion for IBM.
IBM in the second quarter of 2009 reported global technology services revenue of $9.1 billion, down 10 percent from the previous year, and global business services of $4.3 billion, down 15 percent.
HP on Tuesday said its third quarter 2009 services revenue increased 93 percent to $8.5 billion, compared to the same quarter last year, due primarily to the EDS acquisition. This includes infrastructure technology outsourcing revenue of $3.9 billion, and a total revenue for technology services, application services and business process outsourcing of $4.5 billion.
Source: ChannelWeb
Bankruptcy not to affect outsourcing deal: HCL Tech
New-Delhi based IT services provider, HCL Technologies — which signed a $350 million (around Rs 1,700 crore) seven-year IT operations and management deal with Reader’s Digest Association (RDA) in March this year — says RDA’s filing for bankruptcy, under Chapter 11 of the US Bankruptcy Code, will not affect the deal.
“It is business as usual and it (HCL Tech) continues to support RDA and does not see any impact on itself as of now,” the IT firm said in a Bombay Stock Exchange (BSE) filing today. The Chapter 11 filing will apply only to RDA’s US businesses. Its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be hit.
“HCL is at the very core of our global operations, and we value the relationship today and going forward. Our underlying business operations are strong, and we are undertaking this initiative with the banks so we can significantly cut our debt and free cash for use in building our business. Our creditors are supportive and are working to ensure a smooth process with no disruptions to business operations,” said Albert Perruzza, senior vice-president (IT), Global Operations and Business Redesign for RDA, in a statement.
“At this point of time, the nature of the bankruptcy is unknown. We don’t know to what extent the restructuring will happen. It could be segmentation or realigning the existing business for RDA. So, there might not be an immediate impact on HCL Tech,” said Sabyasachi Satapathy, Partner at Tholons Advisory. Analysts tracking the stock markets corroborated that bankruptcy doesn’t mean that the entire business is lost and that many parts of the business are insured. “So, it is difficult to comment on the loss of business for HCL,” said an analyst.
“It is business as usual and it (HCL Tech) continues to support RDA and does not see any impact on itself as of now,” the IT firm said in a Bombay Stock Exchange (BSE) filing today. The Chapter 11 filing will apply only to RDA’s US businesses. Its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be hit.
“HCL is at the very core of our global operations, and we value the relationship today and going forward. Our underlying business operations are strong, and we are undertaking this initiative with the banks so we can significantly cut our debt and free cash for use in building our business. Our creditors are supportive and are working to ensure a smooth process with no disruptions to business operations,” said Albert Perruzza, senior vice-president (IT), Global Operations and Business Redesign for RDA, in a statement.
“At this point of time, the nature of the bankruptcy is unknown. We don’t know to what extent the restructuring will happen. It could be segmentation or realigning the existing business for RDA. So, there might not be an immediate impact on HCL Tech,” said Sabyasachi Satapathy, Partner at Tholons Advisory. Analysts tracking the stock markets corroborated that bankruptcy doesn’t mean that the entire business is lost and that many parts of the business are insured. “So, it is difficult to comment on the loss of business for HCL,” said an analyst.
Tuesday, August 18, 2009
Desi tech companies sharpen India focus
After being stung by the global recession and realising that the desi market is not just better insulated, but also robust and strong, domestic technology majors are sharpening their India focus.
A string of recent announcements by tier I tech companies that they would bid aggressively for government or private projects clearly suggest that India as a software market is too big to ignore.
According to a recent Gartner report, the overall Indian IT services market is pegged to grow to $10.73 billion by 2011 at a five-year compounded annual growth rate (CAGR) of 23.2%. Software services will constitute a fair chunk of that.
Clearly opportunities exist in areas like National e-Governance Plan or Unique Identification card project or servicing the operations of the growing telecom operators, an analyst with a tech major said. It is just that some companies were already here doing these quietly while others want to enhance their presence now. Isn’t a 20+% growth segment attractive, he said.
Unlike many, Wipro has always maintained a sharp and dedicated focus on the domestic IT market. Wipro’s India and Middle East business unit, Wipro Infotech, has been working on the domestic IT market for over two decades, said Anand Sankaran, who heads Wipro’s India and Middle East operations. For Wipro, India has always been an important market and we have a huge presence in India with revenues to the tune of $1 billion and growing.
Government has emerged as one of the leading IT spenders in recent times. Be it ESICs Project Panchdeep which is aimed at improving healthcare or big ticket deals with BSNL and LIC, all these bids now see desi majors bidding aggressively.
Apart from bidding for projects in traditional areas of strength like BFSI, companies are also focusing on emerging opportunity sectors like IT infrastructure, power and utilities.
A string of recent announcements by tier I tech companies that they would bid aggressively for government or private projects clearly suggest that India as a software market is too big to ignore.
According to a recent Gartner report, the overall Indian IT services market is pegged to grow to $10.73 billion by 2011 at a five-year compounded annual growth rate (CAGR) of 23.2%. Software services will constitute a fair chunk of that.
Clearly opportunities exist in areas like National e-Governance Plan or Unique Identification card project or servicing the operations of the growing telecom operators, an analyst with a tech major said. It is just that some companies were already here doing these quietly while others want to enhance their presence now. Isn’t a 20+% growth segment attractive, he said.
Unlike many, Wipro has always maintained a sharp and dedicated focus on the domestic IT market. Wipro’s India and Middle East business unit, Wipro Infotech, has been working on the domestic IT market for over two decades, said Anand Sankaran, who heads Wipro’s India and Middle East operations. For Wipro, India has always been an important market and we have a huge presence in India with revenues to the tune of $1 billion and growing.
Government has emerged as one of the leading IT spenders in recent times. Be it ESICs Project Panchdeep which is aimed at improving healthcare or big ticket deals with BSNL and LIC, all these bids now see desi majors bidding aggressively.
Apart from bidding for projects in traditional areas of strength like BFSI, companies are also focusing on emerging opportunity sectors like IT infrastructure, power and utilities.
Monday, August 17, 2009
India's Outsourcing Firms Lure More Japan Business
Source: WallStreetJournal
Indian software and outsourcing companies are starting to crack the tough Japanese market in an effort to trim their dependence on ailing U.S. financial clients.
Wipro Technologies Ltd., Infosys Technologies Ltd. and other Indian information-technology companies that had only tiny teams here five years ago now have thousands of employees dedicated to Japan. And with Japan's aging populace producing few new engineers, Indian companies expect much more business in the future.
"The game is changing," for Japanese companies, says Hiroshi Alley, the Yokohama-based head of Wipro's Japan and China businesses. "They are becoming more open to outsourcing and taking it further and even going offshore."
Wipro just had its best year to date in Japan. Its revenue there climbed 15% to $115 million in the year ended March 31. While that is 2% of Wipro's global revenue, Mr. Alley expects close to 10% of the company's sales to come from Japan over the next few years.
India's software companies are keen to diversify. This year has been painful proof of the problems of overexposure to the U.S. financial industry. Outsourcers have seen their profits plunge because often more than 60% of their revenues come from the U.S., and most of that from the troubled financial industry.
Japanese companies have been reluctant to use foreign companies. Still, some are slowly starting to experiment with sending information-technology work to China and India.
Wipro engineers in India, for example, are helping design car-navigation systems for Toshiba Corp. and medical scanners for Olympus Corp. Infosys is designing software for Fujitsu Ltd., and Tata Consultancy Services Ltd. is designing the on-board systems for some Nissan Motor Co. cars.
Japanese investment bank Daiwa Securities SMBC Co. chose India's Tata Consultancy to build its international automated trading system. Tata had more experience in building this kind of software than its Japanese competitors, and charged half of what they were asking.
"There were concerns about using an Indian company, but we saw what they are already doing in the U.S. and Europe and that gave us confidence," says Masaji Harada, the Tokyo-based general manager of Daiwa's IT department. "To survive, we must become more international."
V. Sriram, the Tokyo-based head of Infosys' Japan business, says he started to look for customers in Japan in 1997 but there was little interest then. It wasn't until the past five years when Japanese companies noticed their competitors using Indian firms that some started to consider outsourcing projects. During the last fiscal year Infosys had sales of $88 million in Japan. It is expanding its Japan team this year even as it cuts back at home.
Japan's interest in outsourcing is part global trend and part local demographics. As its population ages, it isn't producing enough computer engineers to keep up with demand. More than three million Japanese are expected to retire from the service sector alone by 2020, according to India's Nasscom, a software-industry lobbying group in India.
The shortage is already so acute that Japanese businesses had to deal with what they dubbed the 2007 Cobol Problem, when a large batch of older engineers who programmed in the Cobol computer language -- which many Japanese companies still use for their internal systems -- retired.
"They are short of engineers" for technology work, says Girija Pande, executive vice president in charge of the Asia/Pacific business at Tata Consultancy. "They have to look to China and India."
In pursuit of Japanese clients, Indian companies put their engineers through Japanese-language and business-culture courses. They also send their Japanese employees to India to learn how business is done there.
While the language barrier is one of the reasons the outsourcing business isn't bigger, Indian companies say the biggest barrier is corporate culture in Japan. It can be difficult to persuade companies to trust part of their business to others, especially when that company's model is to do most of the work half way around the globe. Japanese companies also expect perfection, the Indian firms say, even if that takes time. The Indian software model, meanwhile, leans more toward delivering software quickly, testing it and fixing it along the way.
"They want absolute completion and absolute robust reliability," says Mr. Sriram of Infosys.
Indian software and outsourcing companies are starting to crack the tough Japanese market in an effort to trim their dependence on ailing U.S. financial clients.
Wipro Technologies Ltd., Infosys Technologies Ltd. and other Indian information-technology companies that had only tiny teams here five years ago now have thousands of employees dedicated to Japan. And with Japan's aging populace producing few new engineers, Indian companies expect much more business in the future.
"The game is changing," for Japanese companies, says Hiroshi Alley, the Yokohama-based head of Wipro's Japan and China businesses. "They are becoming more open to outsourcing and taking it further and even going offshore."
Wipro just had its best year to date in Japan. Its revenue there climbed 15% to $115 million in the year ended March 31. While that is 2% of Wipro's global revenue, Mr. Alley expects close to 10% of the company's sales to come from Japan over the next few years.
India's software companies are keen to diversify. This year has been painful proof of the problems of overexposure to the U.S. financial industry. Outsourcers have seen their profits plunge because often more than 60% of their revenues come from the U.S., and most of that from the troubled financial industry.
Japanese companies have been reluctant to use foreign companies. Still, some are slowly starting to experiment with sending information-technology work to China and India.
Wipro engineers in India, for example, are helping design car-navigation systems for Toshiba Corp. and medical scanners for Olympus Corp. Infosys is designing software for Fujitsu Ltd., and Tata Consultancy Services Ltd. is designing the on-board systems for some Nissan Motor Co. cars.
Japanese investment bank Daiwa Securities SMBC Co. chose India's Tata Consultancy to build its international automated trading system. Tata had more experience in building this kind of software than its Japanese competitors, and charged half of what they were asking.
"There were concerns about using an Indian company, but we saw what they are already doing in the U.S. and Europe and that gave us confidence," says Masaji Harada, the Tokyo-based general manager of Daiwa's IT department. "To survive, we must become more international."
V. Sriram, the Tokyo-based head of Infosys' Japan business, says he started to look for customers in Japan in 1997 but there was little interest then. It wasn't until the past five years when Japanese companies noticed their competitors using Indian firms that some started to consider outsourcing projects. During the last fiscal year Infosys had sales of $88 million in Japan. It is expanding its Japan team this year even as it cuts back at home.
Japan's interest in outsourcing is part global trend and part local demographics. As its population ages, it isn't producing enough computer engineers to keep up with demand. More than three million Japanese are expected to retire from the service sector alone by 2020, according to India's Nasscom, a software-industry lobbying group in India.
The shortage is already so acute that Japanese businesses had to deal with what they dubbed the 2007 Cobol Problem, when a large batch of older engineers who programmed in the Cobol computer language -- which many Japanese companies still use for their internal systems -- retired.
"They are short of engineers" for technology work, says Girija Pande, executive vice president in charge of the Asia/Pacific business at Tata Consultancy. "They have to look to China and India."
In pursuit of Japanese clients, Indian companies put their engineers through Japanese-language and business-culture courses. They also send their Japanese employees to India to learn how business is done there.
While the language barrier is one of the reasons the outsourcing business isn't bigger, Indian companies say the biggest barrier is corporate culture in Japan. It can be difficult to persuade companies to trust part of their business to others, especially when that company's model is to do most of the work half way around the globe. Japanese companies also expect perfection, the Indian firms say, even if that takes time. The Indian software model, meanwhile, leans more toward delivering software quickly, testing it and fixing it along the way.
"They want absolute completion and absolute robust reliability," says Mr. Sriram of Infosys.
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